UBS strategist says recent targeted ground operation by Israel into Lebanon will not be a significant driver of price.
UBS Precious Metals Strategist Joni Teves told Bloomberg Tuesday that the impact of Israel’s limited ground operation into Lebanon will not have a straightforward impact on gold prices.
Early Tuesday, a U.S. official told CBS Iran is planning an “imminent” ballistic missile attack on Israel in response to the ground operation. Gold prices were trading about 1% higher at $2,665 an ounce on the day.
“The way we look at it, (geopolitical tensions) add to a list of reasons why investors would want to hold gold as part of their portfolio. The immediate price reaction is not really straightforward,” Teves said.
So what is driving prices?
Teves said investors should pay more attention to interest rates and other macroeconomic factors that appear to have more of an effect on prices. Ultimately, however, it comes down to demand.
“The more sustainable impact on the gold price is the interest that investors want to have gold as part of their portfolio,” she said.
Moving forward?
The U.S. elections, set for the first Tuesday in November, could potentially play a role in precious metals prices, but Teves said similarities between the two candidates, at least in the financial realm, may bring negligible changes to the market.
“I don’t think there’s a lot of positions specifically ahead of the U.S. elections,” she said. “It’s more about the fiscal position and what the outcome would mean for that. The expectation that the U.S. fiscal deficit will deteriorate regardless of who wins the election seems to be position long term for gold.”
Physical trading
Teves said the COMEX has been seeing more short-term positions, which she believes could signal brief, but meaningful, consolidation in the short-term. However, when looking at a longer-term window, Teves said the potential for higher gold remains.
“If you look back at historical data, we’re still not at all-time highs (with inflows),” she said. “Our view is that the market is still not stretched. There’s more room to build positions with gold.”
What about the other precious metals?
UBS is forecasting higher gold prices in 2025, however, Teves said she believes silver provides the most potential moving into the upcoming year.
“We see the silver market to continue to be in deficit, so that does add a bit of support to silver prices. Platinum and palladium is more fundamental rather than macro, so we do see deficits in the platinum market that we think prices will go higher in the medium and long term,” she said.
She said UBS is targeting $36 an ounce by end of 2024 and $40 an ounce by end of 2025.
On palladium, Teves was less bullish and said, “It will trade in a broad range over the next few years. We believe the market will move into a surplus.”
Written by Tim Zyla of The Jerusalem Post
